The U.S. added more jobs than expected in June, strengthening expectations for at least two more rate hikes this year despite lower-than-forecast wage growth and a higher unemployment rate.

Total nonfarm payroll employment increased by 213,000 in June, ahead of Econoday's consensus forecast of 190,000. Job gains in April and May were revised up to 175,000 and 244,000, respectively.

Average hourly earnings rose 0.2%, or 5 cents, month over month, below consensus estimates and May's reading of a 0.3% monthly increase.

In annual terms, wages rose 2.7%, or 72 cents, in June, matching last's month's growth rate but falling below the consensus estimate of a 2.8% increase.

"[W]e have a U.S. economy growing at around 4% in the current quarter, that has an incredibly tight labor market with headline consumer price inflation potentially rising to 3% next week," said James Knightley, chief international economist at ING.

"This suggests the Federal Reserve needs to keep raising interest rates with at least two more rate hikes likely this year," Knightley added.

However, "an escalating trade war poses a clear threat," which could hurt sentiment and lead to a slower pace of growth in capital expenditure and job creation, Knightley said, adding that this could result in a slower pace of rate hikes next year.

Yields for 10-year Treasurys slipped 1 basis point to 2.8163% as of 10:35 a.m. ET.

The Federal Open Market Committee, which raised its benchmark interest rate at the June 13 meeting, has signaled it may hike rates twice more this year if its current outlook holds up.

"Nothing in today's report should change the Fed's policy outlook," analysts at TD Securities said, adding that they forecast continued gradual rate hikes in September and December this year.